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The problem of rent

The second of my blogs on five key housing issues for 2012 looks at the debate about the Beveridge report taking place inseeming ignorance of what it actually said.

The 70th anniversary is not till December but politicians are already claiming it as justification for their welfare reforms. Shadow work and pensions secretary Liam Byrne was first out of the traps for Labour with a briefing to the Mail on Sunday which reported that that Labour leader Ed Miliband intends to get tough on ‘scroungers’ and that Byrne thinks Beveridge would ‘turn in his grave’ at the thought of billions in benefits going to ‘lifelong spongers’.

The piece quoted a source close to Byrne as saying: ‘When Beveridge wrote his report, the main idea was that you only got paid by the state if you paid in first. He would never have agreed with anyone choosing to spend a lifetime on benefits. Idleness was one of his “giant evils”. The benefits system has expanded in a way that Beveridge would never have foreseen, such as the new evil of benefits dependency. He would be turning in his grave if he knew we spend £20 billion a year on housing benefits.’

On Tuesday, Byrne wrote a piece for The Guardian that makes the same point from a different angle. ‘Beveridge’s system was built on the idea of full employment,’ he said. ‘For him, “idleness” was an evil every bit as insidious as disease or squalor. So he would have been horrified at the long-term unemployment breaking out all over Britain, with over a million young people without work, and appalled at the spiralling cost of benefits. He would scarcely have believed housing benefit alone is costing the UK over £20 billion a year. That is simply too high.’

Byrne did not mention the words ‘scroungers’ or ‘spongers’ and attacked government plans to scrap disability benefits that people have paid in for. ‘But beyond this, “something for something” means reward for those who are desperately trying to do the right thing, saving for the future and trying to build a stable, secure home. Right now, these families are offered too little reward and incentive – in social housing and long-term savings – for the kind of behaviour that is the bedrock of a decent society.’

On its front page, The Guardian reported that he was arguing that ‘the ballooning of the system has provided support that is unearned, and mislaid the original ideal of providing help to those that contribute’ and that the three key flaws in the current welfare state are ‘the spiralling housing benefit budget, benefits for long-term unemployment, and the lack of proper incentives to reward responsible long-term savers’.

All of this has not surprisingly provoked a strong reaction on the Left - one that Byrne might actually welcome as reinforcing his message to the mainstream. For a flavour of the reaction in the blogosphere, go here, here and here and for more comment in The Guardian go here.

My own reaction - especially when it came to the point about housing benefit - was that Beveridge said nothing of the sort and it sent me back to the history books to check.

To give him his due, Byrne does point out that Beveridge detested the term ‘welfare state’ (he preferred ‘social security state’) but his interpretation seems otherwise wide of the mark.

Here’s what Beveridge actually said about rents: ‘The attempt to fix rates of insurance benefit and pension on a scientific basis with regard to subsistence needs has brought to notice a serious difficulty in doing so in the conditions of modern Britain. This is the problem of rent. In this as in other respects, the framing of a satisfactory scheme of social security depends on the solution of other problems of economic and social organisation.’

The ‘problem of rent’ was the way that there were so many variations between regions that it was impossible to design a flat-rate benefit to accommodate them all.

Beveridge published his report in the context of private sector rent control and subsidised council housing. By ‘the solution of other problems of economic and social organisation’ he meant not just full employment - which he assumed as one of the conditions for the success of his report alongside a national health service and family allowances - but a post-war programme of council house building too.

He was a Liberal but not a wet one (he favoured training camps for ‘malingerers’). He took a narrow brief about making a survey of ‘existing national schemes of social insurance schemes of social insurance and allied services, including workmen’s compensation, and to make recommendations’ and turned it into a radical plan for slaying the five giants of want, disease, ignorance, squalor and idleness.

In the process, incidentally, and helped by the fact that it was published in December 1942 within weeks of the victory at El Alamein that marked the turning point of the war, it sold 630,000 copies and 92 per cent of the population were aware of his recommendations.

So Beveridge would indeed be turning in his grave if he knew we were spending £20 billion a year on housing benefits - but not on the grounds that this was reinforcing ‘idleness’ and scrounging but that it was demonstrating crass stupidity and waste by successive governments of both parties and ignorance by those attempting to claim his mantle.

The reasons why the bill is £20 billion are that housing benefit has been made to take the strain of inadequate social housing investment and rising social and private rents over the last 35 years, because the claimant count has risen over the last three because of the recession and because millions of people are on pensions and wages too low to be able to afford to pay their rent without assistance.

Far from reinforcing idleness, housing benefit is actually essential to helping people into work. Cuts to it will increase want rather than reduce idleness.

There were problems with the Beveridge plan and the way it was implemented and lots more strains that emerged as the structure of society changed in subsequent decades but pretending that you can deal with ‘the problem of rent’ by wishing it away or blaming it on fecklessness was not one of them.

Readers' comments
(6)

Jules, Beveridge would be dismayed of reports of the £20bn HB bill when in fact it currently stands at £22,401,143,111 - and is 12% above the errant £20bn figure.

He would however be pleased that the majority of those receiving HB are in work, similarly so with a third of them being retired and helped with a hand-up for their housing costs.

He would however be dismayed of the feckless that have been unemployed for 5 years or more at 0.8% - a figure reported again in the last week and puts the feckless argument and myth into context.

Still at least its consistent with this governments housing policy. Only 14303 HB claims exceeded the caps when announced last year - thats 0.3% of HB claims.

And Shapps latest (renewed and reannounced) slur on social tenants, the household income over £100k (that includes joint and all household income by the way) at 6,000 social tenants out of 4.2m social tenancies - a whopping 0.14%

Perhaps the nub of the disagreement is that Beveridge could not have perceived of an economic system that relied upon mass unemployment to minimise wage costs and maximise profit, along with a corporate mentality of tax evasion rather than social conscience and philantropy.

In short Beveridge could not have predicted the usurping of British traditional values with the selfishness, brutishness, and waste of Thatcherism, nor could he have perceived the impotence of the Labour and Trade Union movement, or indeed their complicity in the corruption of the economic base.

There are supposed to be 10 million peopleof working age who are not employed,includingsingle parents,disabled people,and theunemployed.The tories are now proclaimingthat they will cut £60 billion off thesocial security bill when the retirement age goesup to 67,which will affect about 7 million people. So there will be a collassal number of peoplein the future who are not able to find work!

"As seen some of those giving evidence to Beveridge recommended a subsistence benefit plus actual rent. Beveridge acknowledged the sense of this, especially as the Unemployment Assistance Board had met the cost of rent and those who would not in future qualify for an insurance benefit, but would receive means tested National Assistance, could also expect to have their rent paid. The problem for Beveridge was that his plan was based on flat rate contributions which would earn a flat rate benefit, while rent varied from one part of the country to another and from person to person in a way which was not always related to the size of family. Individual assessments would introduce significant administrative complications to the scheme, and regional rates could not allow for the wide differences within regions or between families. On the other hand, rent was not an item on which immediate economies could be made – as they could for clothing for example – and the level of rent was not always within the control of the individual.

The solution adopted was acknowledged to be less than satisfactory. This was to include a flat rate sum in the benefit as an allowance for rent and to rely on the plans for post-war improvement in housing provision to even out rents. In addition, if more choice was made available, it would enable the unemployed to adapt their housing costs to their circumstances.

Underpinning all these arrangements would be a safety net in the form of means tested National Assistance. This, as seen earlier, would deal with abnormal needs, which would include high rent where necessary."

- Beveridge seemed to be calling for flat rate benefits - i.e. what you might generously call 'capped benefits' in todays language. The problem of rent was that in conjunction with the need to cap benefits, and with everyone contributing a flat rate towards the insurance (not progressive), the rent component creates inequalities. People in cheaper rents areas, may have more disposable income than those in expensive rent areas if benefits are capped, or living in different personal circumstances could face different housing costs - that was what the problem of rent was.

The concept was to overcome this by evening out rents - which they wanted to achieve by building new postwar housing in regions of low supply, to try to balance rents between regions. As history shows this attempt has turned out to be unsuccessful (and this failure was entirely predictable). So my question is, would Beveridge really be calling for more house building now to reduce the housing benefit bill, given he had reservations even at the time about that as a solution?

I believe the spirit of the Beveridge report was to help those who suffered an interruption or loss of employment - i.e. it was designed to help up those who had fallen on to hard times. There were difficult questions - what happens when workers can't afford to contribute adequately into the flat rate insurance, what duration may a claimant claim for (until they have used up their contributions - what then?), how do you protect against abuses? These are very much the same issues we face today, are they not.

I think Beveridge answers this nicely:

"In this as in other respects, the framing of a satisfactory scheme of social security depends on the solution of other problems of economic and social organisation."

Surely the framing of a satisfactory scheme depends now on our economic recovery - which just happens to be the primary focus of the coalition. Note I am not saying they are doing a good job of it - they aren't! But the focus should be on deficit reduction and removing barriers to economic recovery. Is it not only then that we can meaningfully discuss how a satisfactory scheme should be framed?

Interesting points there, Jono. You're right, the same issues do keep coming back eg the creation and abolition of the shopping incentive in the LHA, the problems incorporating housing benefit into a flat-rate universal credit etc etc. As for the solution to other problems of economic and social organisation, as I was saying he was writing on the assumption of full employment and private sector rent control. Big question is whether he would have seen solution to current economic problems as deficit reduction or would he have agreed with the co-architect of the post-war system Keynes? Deficit and debt both higher in 1945 than now but we still (largely) implemented the Beveridge report.